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                                                                    EXHIBIT 10.7

             AMENDED AND RESTATED GUARANTY AND SURETYSHIP AGREEMENT

                  THIS AMENDED AND RESTATED GUARANTY AND SURETYSHIP AGREEMENT
(this "Guaranty") is made and entered into as of this 25th day of March, 2002,
by DOVER DOWNS, INC., a Delaware corporation, (the "Guarantor"), with an address
at 1131 N. duPont Highway, Dover, DE 19903, in consideration of the extension of
credit by the banks and other financial institutions (collectively, the "Banks")
from time to time party to the Amended and Restated Credit Agreement of even
date herewith among the Banks, WILMINGTON TRUST COMPANY, as Agent (the "Agent"),
with an address of 121 State Street, Dover, DE 19803, and DOVER DOWNS GAMING &
ENTERTAINMENT, INC. (the "Borrower"), and other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged.

                                   BACKGROUND

                  In connection with the Credit Agreement, it is a condition
precedent to the effectiveness of the Credit Agreement and to the making of
loans and the issuance of letters of credit by the Banks from time to time that
the Guarantor executes and delivers this Guaranty.

                  In consideration of the foregoing and in order to induce the
Banks to make loans and issue letters of credit to the Borrower under the Credit
Agreement from time to time and for other consideration, the receipt and
sufficiency of which is hereby acknowledged, and intending to be legally bound
hereby, the Guarantor hereby agrees as follows:

                  1.       Guaranty of Obligations. The Guarantor hereby
                           -----------------------
guarantees, and becomes surety for, the prompt payment and performance of all
loans, advances, debts, liabilities, obligations, covenants and duties owing by
the Borrower to the Agent and the Banks of any kind or nature, present or
future (including, without limitation, any interest accruing thereon after
maturity, or after the filing of a petition in bankruptcy, or the commencement
of any insolvency, reorganization or like proceeding relating to the Guarantor
or the Borrower, whether or not a claim for post-filing or post-petition
interest is allowed in such proceeding), whether or not evidenced by any note,
guaranty or other instrument, arising under the Credit Agreement or any Loan
Document (as defined in the Credit Agreement), whether direct or indirect
(including those acquired by assignment or participation), absolute or
contingent, joint or several, due or to become due, now existing or hereafter
arising, and any amendments, extensions, renewals or increases and all costs
and expenses of the Agent and the Banks incurred in the modification,
enforcement or collection of any of the foregoing, including reasonable
attorneys' fees and expenses (collectively the "Obligations"). If the Borrower
defaults under any such Obligations, the Guarantor will pay the amount due to
the Agent and the Banks.

                  2.       Nature of Guaranty; Waivers. This is a guaranty of
                           ---------------------------
payment and not of collection and the Agent and the Banks shall not be
required, as a condition of the Guarantor's liability, to make any demand upon
or to

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pursue any of its rights against the Borrower, or to pursue any rights which
may be available to them with respect to any other person who may be liable for
the payment of the Obligations.

                           This is an absolute, unconditional, irrevocable and
continuing guaranty and will remain in full force and effect until all of the
Obligations have been indefeasibly paid in full, and the Agent and the Banks
have terminated this Guaranty. This Guaranty will not be affected by any
surrender, exchange, acceptance, compromise or release by the Agent or any Bank
of any other party, or any other guaranty or any security held by it for any of
the Obligations, by any failure of the Agent or any Bank to take any steps to
perfect or maintain its lien or security interest in or to preserve its rights
to any security or other collateral for any of the Obligations or any guaranty,
or by any irregularity, unenforceability or invalidity of any of the
Obligations or any part thereof or any security or other guaranty thereof. The
Guarantor's obligations hereunder shall not be affected, modified or impaired
by any counterclaim, set-off, deduction or defense based upon any claim the
Guarantor may have against the Borrower or the Agent or any Bank, except
payment or performance of the Obligations.

                           Notice of acceptance of this Guaranty, notice of
extensions of credit to the Borrower from time to time, notice of default,
diligence, presentment, notice of dishonor, protest, demand for payment, are
hereby waived.

                           The Agent and the Banks at any time and from time to
time, without notice to or the consent of the Guarantor, and without impairing
or releasing, discharging or modifying the Guarantor's liabilities hereunder,
may (a) change the manner, place, time or terms of payment or performance of or
interest rates on, or other terms relating to, any of the Obligations; (b)
renew, substitute, modify, amend or alter, or grant consents or waivers
relating to any of the Obligations, any other guaranties, or any security for
any Obligations or guaranties; (c) apply any and all payments by whomever paid
or however realized including any proceeds of any collateral, to any
Obligations of the Borrower in such order, manner and amount as the Bank may
determine in its sole discretion; (d) deal with any other persons with respect
to any Obligations in such manner as the Agent or any Bank deems appropriate in
its sole discretion; (e) substitute, exchange or release any security or
guaranty; or (f) take such actions and exercise such remedies hereunder as
provided herein.

                  3.       Repayments or Recovery from Bank. If any demand is
                           --------------------------------
made at any time upon the Agent or any Bank for the repayment or recovery of
any amount received by it in payment or on account of any of the Obligations
and if the Agent or any Bank repays all or any part of such amount by reason of
any judgment, decree or order of any court or administrative body or by reason
of any settlement or compromise of any such demand, the Guarantor will be and
remain liable hereunder for the amount so repaid or recovered to the same
extent as if such amount had never been received originally by the Agent or any
Bank. The provisions of this section will be and remain effective
notwithstanding any contrary action which may have been taken by the Guarantor
in reliance upon such payment, and any such contrary action so taken will be
without prejudice to the Agent's or any Bank's rights hereunder and will be
deemed to have been conditioned upon such payment having become final and
irrevocable.

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                  4.       Enforceability of Obligations. No modification,
                           -----------------------------
limitation or discharge of the Obligations arising out of or by virtue of any
bankruptcy, reorganization or similar proceeding for relief of debtors under
federal or state law will affect, modify, limit or discharge the Guarantor's
liability in any manner whatsoever and this Guaranty will remain and continue
in full force and effect and will be enforceable against the Guarantor to the
same extent and with the same force and effect as if any such proceeding had
not been instituted. The Guarantor waives all rights and benefits which might
accrue to it by reason of any such proceeding and will be liable to the full
extent hereunder, irrespective of any modification, limitation or discharge of
the liability of the Borrower that may result from any such proceeding.

                  5.       Events of Default. If any of the following occur
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(each an "Event of Default"): (i) any Event of Default (as defined in the
Credit Agreement) (ii) the failure by the Guarantor to perform any of its
obligations hereunder; (iii) the falsity, inaccuracy or material breach by the
Guarantor of any written warranty, representation or statement made or
furnished to the Agent or any Bank by or on behalf of the Guarantor; or (iv)
the termination or attempted termination of this Guaranty, then the Guarantor
will, on the demand of the Agent or any Bank, immediately deposit with the
Agent in U.S. dollars all amounts due or to become due under the Obligations
and the Agent will use such funds to repay the Obligations. Upon the occurrence
of any Event of Default, the Agent or any Bank in its discretion may exercise
with respect to any collateral any one or more of the rights and remedies
provided a secured party under the applicable version of the Uniform Commercial
Code.

                  6.       Right of Setoff. In addition to all liens upon and
                           ---------------
rights of setoff against the money, securities or other property of the
Guarantor given to the Agent and the Banks by law, each of the Banks shall
have, with respect to the Guarantor's obligations to such Bank under the
Guaranty and to the extent permitted by law, a contractual possessory security
interest in a contractual right of setoff against, and the Guarantor hereby
assigns, conveys, delivers, pledges and transfers to the Agent for the ratable
benefit of the Banks all of the Guarantor's right, title and interest in and
to, all deposits, moneys, securities and other property of the Guarantor now or
hereafter in the possession of or on deposit with, or in transit to any of the
Banks, whether held in a general or special account or deposit, whether held
jointly with someone else, or whether held for safekeeping or otherwise,
excluding, however, all IRA, Keogh, and trust accounts. Every such security
interest and right of setoff may be exercised without demand upon or notice to
the Guarantor. Every such right of setoff shall be deemed to have occurred
immediately upon the occurrence of an Event of Default hereunder without any
action of any of the Banks, although each of the Banks may enter such setoff on
its respective books and records at a later time.

                  7.       Costs. The Guarantor agrees to pay or reimburse each
                           -----
Bank for all of its costs and expenses incurred in connection with the
enforcement or preservation of any rights under this Guaranty, including,
without limitation, reasonable fees and disbursements of counsel to the Agent
and to the several Banks.

                  8.       Postponement of Subrogation. Until the Obligations
                           ---------------------------
are indefeasibly paid in full, the Guarantor postpones and subordinates in
favor of the Agent for the ratable benefit of the Banks any and all rights
which the Guarantor may have to (a) assert any claim

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against the Borrower based on subrogation rights with respect to payments made
hereunder, and (b) any realization on any property of the Borrower, including
participation in any marshalling of the Borrower's assets.

                  9.       Notices. All notices, demands, requests, consents,
                           -------
approvals and other communications required or permitted hereunder must be in
writing and will be effective upon receipt if delivered personally, or if sent
by facsimile transmission with confirmation of delivery, or by nationally
recognized overnight courier service, to the addresses for the Bank and the
Guarantor set forth above or to such other address as one may give to the other
in writing for such purpose.

                  10.      Preservation of Rights. No delay or omission on the
                           ----------------------
Agent's or the Bank's part to exercise any right or power arising hereunder will
impair any such right or power or be considered a waiver of any such right or
power, nor will the Agent's or the Bank's action or inaction impair any such
right or power. The Agent's and the Bank's rights and remedies hereunder are
cumulative and not exclusive of any other right or remedies which the Agent or
any Bank may have under other agreements, at law or in equity. The Agent or any
Bank may proceed in any order against the Borrower, the Guarantor or any other
obligor of, or collateral securing, the Obligations.

                  11.      Illegality. In case any one or more of the
                           ----------
provisions contained in this Guaranty should be invalid, illegal or
unenforceable in any respect, the validity, legality and enforceability of the
remaining provisions contained herein shall not in any way be affected or
impaired thereby.

                  12.      Changes in Writing. No modification, amendment or
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waiver of any provision of this Guaranty nor consent to any departure by the
Guarantor therefrom will be effective unless made in a writing signed by the
Agent, and then such waiver or consent shall be effective only in the specific
instance and for the purpose for which given. No notice to or demand on the
Guarantor in any case will entitle the Guarantor to any other or future notice
or demand in the same, similar or other circumstance.

                  13.      Entire Agreement. This Guaranty (including the
                           ----------------
documents and instruments referred to herein) constitutes the entire agreement
and supersedes all other prior agreements and understandings, both written and
oral, between the Guarantor and the Agent and the Banks with respect to the
subject matter hereof.

                  14.      Successors and Assigns. This Guaranty will be binding
                           ----------------------
upon and inure to the benefit of the Guarantor and the Agent and the Banks and,
other than with respect to Section 6, their respective heirs, executors,
administrators, successors and assigns; provided, however, that the Guarantor
                                        --------  -------
may not assign this Guaranty in whole or in part without the Agent's prior
written consent and the Agent and any Bank at any time may assign this Guaranty
in whole or in part.

                  15.      Interpretation. In this Guaranty, unless the Agent
                           --------------
and the Guarantor otherwise agree in writing, the singular includes the plural
and the plural the singular; references

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to statutes are to be construed as including all statutory provisions
consolidating, amending or replacing the statute referred to; the work "or"
shall be deemed to include "and/or", the words "including", "includes" and
"include" shall be deemed to be followed by the words "without limitation"; and
references to sections or exhibits are to those of this Guaranty unless
otherwise indicated. Section headings in this Guaranty are included for
convenience of reference only and shall not constitute a part of this Guaranty
for any other purpose. If this Guaranty is executed by more than one party as
Guarantor, the obligations of such persons or entities will be joint and
several.

                  16.      Indemnity. The Guarantor agrees to indemnify each of
                           ---------
the Agent, each Bank and their respective directors, officers and employees and
each legal entity, if any, who controls the Agent or any Bank (collectively,
the "Indemnified Parties") and to hold each Indemnified Party harmless from and
against any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements of any kind or
nature whatsoever with respect to the execution, delivery, enforcement and
performance of this Guaranty (all of the foregoing, collectively, the
"Indemnified Liabilities"); provided, however, that the Guarantor shall have no
                            --------  -------
obligation hereunder to any Indemnified Party with respect to Indemnified
Liabilities arising from the gross negligence or willful misconduct of any
Indemnified Party. The indemnity agreement contained in this Section shall
survive the termination of this Guaranty.

                  17.      Governing Law and Jurisdiction.
                           ------------------------------

                           (a)      THIS AGREEMENT AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES UNDER THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF DELAWARE.

                           (b)      The Guarantor hereby irrevocably and
unconditionally:

                                    (i)     submits for itself and its property
in any legal action or proceeding relating to this Agreement or for recognition
and enforcement of any judgment in respect thereof, to the non-exclusive
general jurisdiction of the Courts of the State of Delaware, the courts of the
United States of America for the District of Delaware, and appellate courts
from any thereof;

                                    (ii)    consents that any such action or
proceeding may be brought in such courts and waives any objection that it may
now or hereafter have to the venue of any such action or proceeding in any such
court or that such action or proceeding was brought in an inconvenient court
and agrees not to plead or claim the same;

                                    (iii)   agrees that service of process in
any such action or proceeding may be effected by mailing a copy thereof by
registered or certified mail (or any substantially similar form of mail),
postage prepaid, to the Guarantor at the address set forth above or at such
other address of which the Bank shall have been notified pursuant to Section 10
hereof;

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                                    (iv)    agrees that nothing herein shall
affect the right to effect service of process in any other manner permitted by
law or shall limit the right to sue in any other jurisdiction; and

                                    (v)     waives, to the maximum extent not
prohibited by law, any right it may have to claim or recover in any legal
action or proceeding referred to in this subsection any special, exemplary or
punitive or consequential damages.

                  18.      Waiver of Jury Trial. THE GUARANTOR HEREBY
                           --------------------
IRREVOCABLY AND UNCONDITIONALLY WIAVES TRIAL BY JURY IN ANY LEGAL ACTION OR
PROCEEDING RELATING TO THIS AGREEMENT AND FOR ANY COUNTERCLAIM THEREIN.

                  The Guarantor acknowledges that it has read and understood all
the provisions of this Guaranty, including the waiver of jury trial, and has
been advised by counsel as necessary or appropriate.

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                  WITNESS the due execution hereof as a document under seal, as
of the date first written above, with the intent to be legally bound hereby.

                                             DOVER DOWNS, INC.

Attest: /s/ Timothy R. Horne                 By: /s/ Denis McGlynn
        --------------------------------         -----------------------
        Name: Timothy R. Horne                   Name: Denis McGlynn
        Title: Vice President-Finance            Title: President

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